# London fears losing luxury shoppers to Paris and Milan Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-03-14 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: London Luxury Retailers Fear Decline in Tourist Spending Meta Description: Big names like Harrods and Harvey Nichols are urging the UK government to reinstate tax-free shopping for overseas visitors to boost the country's retail URL: https://financedigest.com/london-fears-losing-luxury-shoppers-to-paris-and-milanhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-03-14t181908z1lynxmpej2d0rvrtroptp4britain-tax-luxury-1736814317660-compressed.jpg) By James Davey and Sarah Young LONDON (Reuters) – London’s luxury retailers fear the city is losing its pull as a shopping destination, with tourists from the United States, China and the Gulf flocking instead to Paris and Milan where tax breaks still offer a way to cut the cost of their purchases. With finance minister Jeremy Hunt set to present the government’s budget statement on Wednesday, the industry wants him to reinstate sales-tax-free shopping for overseas visitors, which ended in 2020 when Britain left the European Union. Big names including department stores Harrods and Harvey Nichols, Chelsea property manager Cadogan and The Lanesborough Hotel have joined forces with hundreds of retailers to urge Hunt to [change the rules](https://www.financedigest.com/uk-watchdog-warns-crypto-firms-to-prepare-for-advertising-rule-change.html "UK watchdog warns crypto firms to prepare for advertising rule change"). We’ve heard from some [brands that they’re prioritising Paris for investment](https://www.financedigest.com/5-compelling-reasons-that-you-should-invest-in-branding.html "5 Compelling Reasons That You Should Invest In Branding") in stores,” Steve Medway, CEO of the Knightsbridge and King’s Road Partnerships, told Reuters in an interview at Harrods, before it opened for the day. They’re [seeing the sales.”](https://www.financedigest.com/switzerlands-clariant-sees-slight-sales-drop-in-2023.html "Switzerland’s Clariant sees slight sales drop in 2023") Medway noted that international visitors contribute 28.4 [billion pounds](https://www.financedigest.com/shell-to-evaluate-25-billion-pound-british-investments-after-windfall-tax.html "Shell to ‘evaluate’ 25 billion pound British investments after windfall tax") ($34.5 billion) to UK GDP annually, of which Knightsbridge and the King’s Road are a substantial part. Data from international [tax refund company](https://www.financedigest.com/exxon-sues-eu-in-move-to-block-new-windfall-tax-on-oil-companies.html "Exxon sues EU in move to block new windfall tax on oil companies") Global Blue shows that while spending by U.S. visitors to Britain has recovered to 2019 [pre-pandemic levels](https://www.financedigest.com/fraport-sees-2023-passenger-traffic-at-80-90-of-pre-pandemic-levels.html "Fraport sees 2023 passenger traffic at 80-90% of pre-pandemic levels"), their spending in France, Spain and Italy has shot ahead. To compound the problem, [British shoppers are themselves starting to spend](https://www.financedigest.com/valentines-day-spending-boosts-british-retail-sales-in-february-brc.html "Valentine’s Day spending boosts British retail sales in February – BRC") more in the European Union, where they can also reclaim the value-added tax (VAT) charged on goods. Now, amid signs that some [luxury brands](https://www.financedigest.com/top-luxury-car-brands-in-the-world.html "Top luxury car brands in the world") are investing more in their French stores on the Champs Elysees than in their London outlets, industry executives say the tax incentive should be restored to keep Britain competitive. They argue that its continued lack will have an impact on the whole tourism ecosystem, including hotels, restaurants, taxis, museums and theatres. The government says tourists can still enjoy UK tax-free shopping if they ship goods directly to an overseas address, and that it scrapped VAT-free shopping to [raise revenue and after an assessment found it would not have a large impact on tourism](https://www.financedigest.com/viva-el-vino-perfect-spanish-homes-for-wine-lovers-as-unwto-raises-a-glass-to-wine-tourism.html "Viva el vino! Perfect Spanish homes for wine lovers as UNWTO raises a glass to wine tourism"). OWN GOAL Burberry, Britain’s biggest luxury retail brand, warned last year that [London was losing out to other European cities](https://www.financedigest.com/4-for-the-price-of-1-what-you-can-buy-in-the-uks-top-northern-cities-for-the-price-of-a-london-pad.html "4 for the price of 1: What you can buy in the UK’s top northern cities for the price of a London pad") over the VAT rule. Handbag maker Mulberry cited the axing of VAT-free [shopping as a major factor behind the closure of its Bond Street](https://www.financedigest.com/the-high-street-is-dead-long-live-online-shopping.html "The high street is dead – long live online shopping! ") store last month. Sarah Jaconelli, director of communications for the New West End Company which represents 600 businesses, said [Britain had scored a massive own goal:](https://www.financedigest.com/britain-sets-5g-goal-says-no-magic-number-of-operators.html "Britain sets 5G goal, says no ‘magic number’ of operators") “You can go to Europe and get a 20% discount, why wouldn’t you? The [Global Blue](https://www.financedigest.com/taylor-wimpey-espana-launches-blue-cove-mallorca-spain-tops-global-health-ranking.html "Taylor Wimpey España launches Blue Cove in Mallorca, as Spain tops global health ranking") data is stark. It shows spending by American visitors to the UK was back to 101% of 2019 levels in 2022, but that [France and Italy](https://www.financedigest.com/ings-money-management-platform-yolt-expands-to-france-and-italy.html "ING’s money management platform Yolt expands to France and Italy") achieved over twice those levels at 256% and 226% respectively. For visitors from Gulf states – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE – UK [sales were only back](https://www.financedigest.com/european-junk-debt-sales-spring-back-to-life-as-sentiment-improves.html "European junk debt sales spring back to life as sentiment improves") to 65% of 2019 levels. France meanwhile was at 198% relative to 2019, Italy 166% and Spain 158%. More worrying for the future, a Global Blue survey of 10,000 Chinese who [visited Europe in 2019 found that Britain](https://www.financedigest.com/hong-kong-finance-official-to-make-first-visit-to-britain-in-three-years.html "Hong Kong finance official to make first visit to Britain in three years") was also dropping in appeal. While it was the second most popular destination behind France among large [European countries](https://www.financedigest.com/four-european-countries-call-for-special-treatment-of-defence-in-eu-debt-rules-document.html "Four European countries call for special treatment of defence in EU debt rules – document") in 2019, the survey showed only 42% were now planning to visit Britain, down from 70% in 2019, with Spain, Italy and Germany also now more popular. The Chinese will be the most critical demographic to watch because they’ve always been the most price-sensitive,” said Medway, whose [partnership represents hundreds of businesses](https://www.financedigest.com/types-of-business-partnership.html "Types of business partnership") in the luxury shopping districts. That’s why tax-free was so important for them, and now we are the only [country in Europe](https://www.financedigest.com/best-countries-in-europe-to-live-in.html "Best countries in Europe to live in") that doesn’t offer it. Harrods [managing director](https://www.financedigest.com/anya-libova-joins-apester-as-uk-managing-director.html "Anya Libova joins Apester as UK Managing Director") Michael Ward said if no action was taken, the impact would be seen far beyond the stores, with hotels and restaurants in London already noting the absence of international shoppers. Cadogan, the main landlord in the [west London](https://www.financedigest.com/first-time-buyer-bags-a-dream-home-in-south-west-london.html "First time buyer bags a dream home in south west London") districts of Chelsea and Knightsbridge, whose estate spans over 90 acres, also called on the government to act. At a [time when we should focus](https://www.financedigest.com/why-manufacturers-mustnt-lose-their-green-focus-in-troubled-times.html "WHY MANUFACTURERS MUSTN’T LOSE THEIR GREEN FOCUS IN TROUBLED TIMES") on incentivising international travel, we are now at a distinct and unnecessary disadvantage to our neighbouring EU cities,” Chief Executive Hugh Seaborn said. Chinese resident Hang Hen, 22, and a friend were shopping on New Bond Street on Tuesday morning. He said he had not considered the VAT issue before, because he was generally spending his [parents’ money](https://www.financedigest.com/nearly-half-of-parents-still-give-pocket-money-to-their-adult-children.html "Nearly half of parents still give pocket money to their adult children"). “Maybe I’ll keep much more money to go to France?” he said. ($1 = 0.8228 pounds) (Reporting by James Davey and Sarah Young, Additional reporting by Ben Makori; Editing by Kate Holton and Catherine Evans) --- This blog is powered by Superblog. 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